2004 (4) TMI 566 - HC - VAT and Sales Tax

Summary

Issues:
Taxability of turnover of food grains purchased on behalf of ex U.P. principal - Whether purchases were made on behalf of ex U.P. principal for inter-State purchase exemption.

Analysis:
The revision pertains to an order passed by the Trade Tax Tribunal concerning the taxability of food grains turnover for the assessment year 1986-87. The applicant, a commission agent, contended that the purchases were made on behalf of an ex U.P. principal and qualified for exemption under section 3(a) of the Central Sales Tax Act, 1956. The crux of the issue was whether these purchases were genuinely on behalf of the ex U.P. principal. The authorities found discrepancies in the evidence presented by the applicant, particularly the absence of orders from the principal and the delivery of goods in U.P. The assessing authority and Deputy Commissioner upheld the decision that the purchases did not qualify as inter-State purchases due to the physical delivery in U.P. The Tribunal also supported this finding based on the issuance of form XXX-C/1 and the delivery location.

The applicant argued that written orders were not mandatory to establish inter-State purchases and cited relevant case laws. The contention was that the mere presence of the principal during purchases and subsequent dispatch of goods did not negate the inter-State nature of the transaction. The applicant relied on legal principles emphasizing that the movement of goods should be connected to the sale to qualify as inter-State. The Supreme Court's interpretation in Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti was pivotal, highlighting that the movement of goods and sale must be inseparably linked for an inter-State sale to occur.

Drawing from precedents like Co-operative Sugars (Chittur) Limited v. State of Tamil Nadu, the court emphasized that the movement of goods from U.P. to another state should be considered an incident of the sale to determine tax jurisdiction. The court found the Tribunal's reasoning flawed as it failed to establish a clear connection between the sale and the movement of goods. Consequently, the court set aside the Tribunal's order, ruling in favor of the applicant's claim for exemption from tax liability on the turnover of food grains amounting to Rs. 16,75,196.81 as it qualified as inter-State purchases.

In conclusion, the court allowed the revision, emphasizing the legal principles governing inter-State sales and the necessity for a direct link between the sale and the movement of goods to determine tax liability jurisdiction.